Spanish PM says economic disaster averted

Spanish PM says economic disaster averted

Spain's Prime Minister Mariano Rajoy, delivering his first state of the nation address as he fends off a party slush-fund scandal, declared on Tuesday he had slashed the deficit and averted economic catastrophe.

The conservative 57-year-old leader lamented Spain's jobless queue of nearly six million people and a jobless rate of more than 26 percent, but vowed to press ahead with his tight-fisted programme.

"We have achieved a twin task: avoiding the shipwreck that threatened our country and, without wasting a moment, launching the reforms needed for our system of production," Rajoy told parliament.

"For those who ask for some relaxation because the process of change is already under way -- not for a minute, not one single minute of rest," the grey-bearded prime minister said.

Rajoy, hit recently by allegations of corruption in his Popular Party, said Spain had curbed its yawning public deficit to less than 7.0 percent of total economic output in 2012 from 9.4 percent in 2011.

Spain has agreed with Brussels to lower the deficit to 6.3 percent of gross domestic product last year but lowering the shortfall to less than seven percent would be seen as a considerable achievement in a period of severe economic contraction.

"We have left behind us the constant threat of imminent disaster and we are starting to see the path for the future," said Rajoy, whose party took power in December 2011 after ousting the Socialists in an election landslide.

The prime minister, who defied predictions that Spain would have to seek a sovereign bailout last year, thanks in large part to the European Central Bank's promise to intervene in the markets if needed, highlighted the easier conditions Madrid now enjoys when borrowing on financial markets.

"The noose of external debt that tormented us with such force is no longer strangling us," Rajoy said.

The prime minister, who has faced calls to resign over a corruption scandal battering his ruling Popular Party, called for harsher criminal penalties for corruption but insisted Spain was not a corrupt nation.

"It's one thing to condemn and pursue corruption by all means. It is another thing to sow the idea that Spain is a corrupt country, even among the most corrupt," he said.

"Spain is a clean country going through tough times in which cases of corruption emerge just like in any other," Rajoy added.

Rajoy has denied as "absolutely false" purported Popular Party hand-written ledgers, published in the leading daily El Pais, supposedly showing secret payments to at least a dozen senior party officials including himself over a period of more than a decade.

The scandal has sparked anger among Spaniards at a time when they are being asked to make sacrifices with lower salaries, benefit cuts, and lost jobs.

An online petition calling for Rajoy's resignation and snap elections, posted on change.org, has garnered more than 1.1 million signatures.

Defending his spending cuts and tax rises launched last year, Rajoy also announced a series of reforms aimed at stimulating economic activity in Spain.

These included easing the deadlines for value-added tax payments by small and medium-sized businesses.